Question

Consider the Philadelphia­Los Angeles flight discussed in Q16.5. Assume the available capacity is 200 seats and there is no overbooking. The high fare is $675 and the low fare is $375. Demand for the low fare is abundant while demand for the high fare is normally distributed with a mean of 80 and standard deviation 35.
a. What is the probability of selling 200 reservations if you set an optimal protection level for the full fare?
b. Suppose a protection level of 85 is established. What is the average number of lost high-fare passengers?
c. Continue to assume a protection level of 85 is established. What is the expected number of unoccupied seats?
d. Again assume a protection level of 85 is established. What is the expected revenue from the flight?


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  • CreatedMarch 31, 2015
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